Project Payback

Here are some guidelines and questions you can ask to help you choose the contractor best qualified for your project:

You should:

Obtain bids from more than one contractor.

Have the contractor show you they are licensed, insured and can produce a certificate for refrigerant handling if needed.

Have the contractor provide examples of quality work and names of customers for reference.

Have a clear written agreement with all the work listed in detail. All products, their model number and efficiency ratings should be listed.

Ask for explanation of all warranty documentation and have the contractor help with submitting the warranty information.

The contractor should:

Be able to show you a layout of where the equipment will be installed.

Determine the size of your equipment using Manual J or an equivalent calculation method.

Held you determine an estimate of what your payback will be.

Explain the benefits of routine maintenance.

Be able to check refrigerant charge using the proper tools.

Diagnose or repair your duct system, if necessary.

State the scheduled start and completion date.

Inspect the work carefully to make sure there are no safety issues.

Test the system to make sure it is working properly.

Be able to provide an AHRI (Air Conditioning, Heating and Refrigerant Institute) number or Certificate of Product Performance, which helps ensure the technician installed a properly matched system.

Calculating Cost and Savings

How fast your energy efficiency project or heating/cooling system investment pays back the initial cost indicates cost effectiveness. Two common ways of gauging a project’s possible worth is simple payback and life-cycle cost.

Simple payback = Cost Difference/Savings

Example: Your old heating system just failed and your home uses 75 million BTUs of heat each season. You are considering installing a 95% efficient propane furnace andit will use 862 gallons of propane for heating at $1.90 = $1,637.80 per year. This system will cost you $3,600. You are also considering buying a 95% efficient propane furnace with an Energy Star-rated air source heat pump, and plenum heater to go on our off-peak program which has a rate of 5.5 cents per kWh. This system costs will cost you $9,500 up front, but figuring in the cooperative’s rebate for qualifying components, it costs you $8,600. Your heating costs with this system will be $929.70. Your simple payback for choosing the off-peak system would be 7 years.

Simple payback is useful for showing you how long it will take to pay back your initial investment.

Life-cycle cost

Another way of figuring out a good investment is life-cycle cost, which takes time into account.

Example: You have a heating system that last 15 years and costs $1,500 a year in heating expenses for a total lifetime cost of $22,500 not factoring in maintenance. You can purchase a new system for $5,000 that also lasts 15 years, but only costs $900 a year in heating expenses for a total cost of $18,500. Since replacing the heating system is less expensive over the long run, it makes sense to replace it.

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